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Equities
North American indexes turned positive in morning trading Thursday after a weaker start as stimulus efforts by world governments and continuing volatility continue to roil global markets.
Just after 10 a.m.. ET, the Toronto Stock Exchange’s S&P/TSX Composite index was up 90.21 points or 0.77 per cent at 11,811.63. A day earlier, the index dropped more than 7 per cent.
The Dow Jones Industrial Average rose 0.72 per cent to 20,042.80. The S&P 500 gained about 0.51 per cent to trade at 2,409.29. The Nasdaq was up 2.68 per cent at 7,183.86. On Wednesday, the Dow sank more than 6 per cent to close below 20,000 for the first time since early 2017.
Late Wednesday, the ECB launched a €750-billion bond-buying program at an emergency meeting with ECB president Christine Lagarde saying: “Extraordinary times require extraordinary measures.” Earlier, the U.S. Federal Reserve announced its third emergency credit program in two days aimed at keeping the money market mutual fund industry functioning if investors made rapid withdrawals. Also on Wednesday, the Canadian federal government announced a $27-billion aid package and $57-billion in tax deferrals.
“Given the experience of recent weeks, I’m not particularly confident that we’ll see anything more than a short-term bounce,” OANDA senior analyst Craig Erlam said in an early note.
“Ultimately, the only thing investors are interested in is the number of coronavirus cases. China has shown us that these draconian measures do bear fruit, we just have to be patient,” Mr. Erlam said. “As soon as we start to see evidence of this across Europe and the US, I think investors may start to view things differently.”
Overseas, major European markets opened mixed but quickly slid into the red as the session continued. The pan-European STOXX 600 was flat by afternoon. Britain’s FTSE 100 fell 1.12 per cent. Germany’s DAX fell 0.72 per cent.
In Asia, markets took their cue from Wednesday’s weak showing on Wall Street with Japan’s Nikkei ending down 1.04 per cent. The Shanghai Composite Index fell 0.98 per cent. Hong Kong’s Hang Seng dropped 2.61 per cent. South Korea’s Kospi sank 8.39 per cent after earlier triggering a trading halt after it fell 8 per cent.
Commodities
Crude prices bounced early Thursday as stimulus measures appeared to slow panicked selling, although analysts cautioned that volatility will likely persist.
Just after 5 a.m., West Texas Intermediate was up more than 14 per cent while Brent gained more than 8 per cent. The gains, however, pale beside Wednesday’s losses, which saw WTI fall 25 per cent and Brent drop 13 per cent.
The day range on Brent so far is US$24.96 to US$27.31. The range on WTI is US$21.36 to US$24.02.
“Causing a bit of a rollercoaster session was the fact markets were on the lookout for any progress a high-stakes game of chicken to see who blinks first after the Kremlin suggested on Wednesday that it would prefer higher prices,” AxiCorp strategist Stephen Innes said.
Demand concerns brought on by the spread of the virus and the collapse of the travel industry have been aggravated by the demise of an OPEC+ pact to curb production after Russia refused recommendations of deeper cuts. In response, Saudi Arabia said it would raise production and reduce prices for some customers.
On Wednesday, U.S. senators increased pressure on the two to put an end to the current price war.
“Unfortunately, these bullying tactics by Russia have become the norm, but the actions of our close strategic partner Saudi Arabia are particularly concerning,” Senator Kevin Cramer of oil-rich North Dakota, said in a letter to U.S. President Donald Trump.
Mr. Cramer and nine other Republican senators including John Hoeven and Dan Sullivan, had a call on Wednesday with Saudi Ambassador to the United States Princess Reema bint Bandar bin Sultan, hoping to convince the kingdom to stop flooding global oil markets, according to Reuters.
“We need stability in the oil markets during these challenges with COVID-19 to ensure we don’t lose long-term capacity in this essential industry,” Hoeven said in a statement about the call.
In other commodities, gold prices were lower in a choppy session as investors continue to opt for cash.
Spot gold was trading down 0.4 per cent at US$1,480.00 per ounce. The metal fell about 3 per cent on Wednesday along with other precious metals. U.S. gold futures rose 0.3 per cent to $1,481.70.
Currencies
The Canadian dollar slid below the 69-US-cent mark in the predawn period as equity and commodity markets remained volatile despite stimulus efforts by world governments.
The day range on the loonie so far is 68.18 US cents to 69.31 US cents.
“The Canadian dollar finds itself in the unusual position of being a relative out-performer versus its G10 peers today —thanks largely to a bounce in WTI,” Shaun Osborne, chief FX strategist for Bank of Nova Scotia, said.
“The CAD is down just 0.2 per cent against the robust USD amid significant gains across the energy complex as WTI recovers to near US$23/bbl after trading to an 18-year low yesterday.”
However, he also noted that Canadian heavy crude remains near a record low.
“There is no obvious fundamental reason for the rebound and the adverse backdrop for pricing remains in place so the benefit for the CAD may be limited,” he said.
On Wednesday, the loonie tested its lowest level in about seven years as markets began to price in a global recession.
On global exchange markets, the U.S. dollar advanced against major world currencies.
The greenback rose 0.8 per cent against Britain’s pound to US$1.1528, approaching the strongest since at least 1985.
The US dollar rose 3 per cent to an 11-year high versus the New Zealand dollar and advanced more than 3% against the Australian dollar to a 17-year high, according to Reuters.
The euro briefly rose against the dollar and the pound after the European Central Bank announced its asset-purchase program but gave back most of the gains as investors opted for the greenback.
More company news
Canadian Tire says, in response to the growing virus crisis, it will cut operating hours at its Canadian Tire retail stores. The chain will temporarily close Mark’s/L’Équipeur, SportChek, Atmosphere, Party City, Pro Hockey Life, National Sports and PartSource outlets. The temporary closure will be in effect from March 19 until April 2. During the closure, full and part-time employees will continue to be paid, the company said.
Ford Motor Co said on Thursday it would draw down US$15.4-billion from two of its existing credit lines and suspend dividend to preserve cash as it battles a hit to its business from the fast-spreading coronavirus. Ford, which also withdrew its 2020 finnacial forecast, said the additional cash from the borrowings will be used to offset the temporary working capital impacts of the coronavirus-related production shut downs and to preserve.
Britain’s Burberry said sales in the final weeks of March would plunge by up to 80% as the impact of coronavirus already seen in China spread to Europe and the United States, causing stores to close and luxury shopping to dry up. The British brand said like-for-like sales in the final weeks of its financial year to March 28 would be down 70% to 80%, and as a result fourth-quarter sales would be 30% lower.
Hotel operator Marriott International Inc said it was withdrawing its 2020 financial outlook as cancellations mount due to the coronavirus outbreak.
Economic news
Reuters reports that initial claims for U.S. unemployment benefits rose more than expected to 281,000 in the latest week from an unrevised 211,000 the previous week, in the first indication of the toll on employment from the coronavirus outbreak. Economists had forecast claims would rise to 220,000.
(10 a.m. ET) U.S. leading indicators for February.
With Reuters and The Canadian Press